CH. vii MONEY, CREDIT AND PRICES 57
takes the view I have just indicated as to the slight importance in modern times of the Quantity of Money. He says :—
" This question must not be dealt with as if it could be answered once for all by a simple, absolute, and conclusive formula. It is an answer which depends upon the different modes and conditions of doing business which must vary with these modes and conditions. The proper form of putting the question is therefore:—
What in the present state of business is the real connection between gold and prices ? Or to put it in another form : What is it that we call Money ?
What is it that we pay with ? What creates it ?
What limits it ?
The answer which the supporters of the Quantity Theory of Money give is not a simple, absolute, and conclusive formula. They say, " Other things being equal, prices rise and fall in proportion to the Quantity of Money," and they intend that the limitation expressed by the phrase, " Other things being equal" shall cover alterations in the modes and conditions of doing business, as well as fluctuations in the quantity of business.
Lord Farrer also calls attention to the fact that the stocks of money in different countries are not in proportion to their wealth and trade, but I am not aware that any supporter of the